Syncmold Enterprise's (TWSE:1582) Shareholders May Want To Dig Deeper Than Statutory Profit

Following the solid earnings report from Syncmold Enterprise Corp. (TWSE:1582), the market responded by bidding up the stock price. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Syncmold Enterprise

The Impact Of Unusual Items On Profit

To properly understand Syncmold Enterprise's profit results, we need to consider the NT$75m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Syncmold Enterprise's Profit Performance

We'd posit that Syncmold Enterprise's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Syncmold Enterprise's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 71% in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Syncmold Enterprise at this point in time. When we did our research, we found 2 warning signs for Syncmold Enterprise (1 is concerning!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Syncmold Enterprise's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.